1.  Environment as a strategic issue and the role of the board. October 5, 2007 Sirpa Juutinen Environmental risks, standards, activities, responsibilities Chair of the Year

2. PricewaterhouseCoopers October 6, 2007 Slide 2 Environment as a strategic issue on board agenda? Corporate Involvement in Society: A strategic Approach (by Michael E.Porter and Mark R. Kramer (Harvard Business Review, Dec 2006) ) Generic Social Impact Value Chain Social Impacts Social Dimensions of Competitive Context Good CitizenshipMitigate harm from value chain activities Responsive CSR Transform value chain activities to benefit society while reinforcing strategy Strategic philantrophy that leverages capabilities to improve salient areas of competitive context. Strategic CSR 1 Corporate Responbility aspects as part of the strategy Operational Effectiveness Operational Effectiveness Strategic Positioning Strategic Positioning

3. PricewaterhouseCoopers October 6, 2007 Slide 3 Environment as a strategic issue on board agenda? The Board is interested in mega trends – both in terms of risks and opportunities Low-carbon economy

4. PricewaterhouseCoopers October 6, 2007 Slide 4 Environment as a strategic issue on board agenda? Toyota: Eco-innovation the New Market Differentiator Eco-Product Programme Use of recyclable materials Zero waste to landfill Phase out substances of environmental concern Toyota Prius Launched: Japan 1997, USA 2000 & UK 2004 CO2 emissions are 32% lower than normal petrol powered cars In NZ hit the zero waste to landfill target Market performance Total global sales as of April 2006 : 504,700 Global profit increased by 39%, to £3.2 billion in Q2 of 2006 GM and Ford losses of $3.4mill & $254 million in the same period Company Examples Source: Jonathan Porrit, Forum for the Future

5. PricewaterhouseCoopers October 6, 2007 Slide 5 Environment as a strategic issue on board agenda? Sustainability And (Shareholder) Value FCFF: Free cash flow to the firm WACC: Weighted average costs of capital 2 Corporate Responbility reporting

6. PricewaterhouseCoopers October 6, 2007 Slide 6 Environment as a strategic issue on board agenda? Extended Rule Base – what to include in it Main input comes from market and from stakeholders Market Competitors Geographic location Sosio-political environment Stakeholders Internal Employees Suppliers Customers External Shareholders Regulators Customers Corporate Strategy and Objectives Rule Base

7. PricewaterhouseCoopers October 6, 2007 Slide 7 Environment as a strategic issue on board agenda? Environment in the Reports of the Board of Directors – a review of the 50 biggest Finnish companies 20% 40%

8. PricewaterhouseCoopers October 6, 2007 Slide 8 Environment as a strategic issue on board agenda? Case Rautaruukki – a risk approach “… Rautaruukki is committed to the principles of sustainable development. The environmental risks arising from operations are assessed as part of planning when modernising production processes or building new ones. Internal environmental risks were mapped at 30 operating sites during 2006. Environmental due diligence studies to assess the standard of environmental protection were carried out at sites acquired in conjuction with acquisitions.…”

9. PricewaterhouseCoopers October 6, 2007 Slide 9 Environment as a strategic issue on board agenda? Case Ahlstrom – a risk approach “ …“

10. PricewaterhouseCoopers October 6, 2007 Slide 10 Environment as a strategic issue on board agenda? Case Kemira Growhow – a compliance approach “ …“

11. PricewaterhouseCoopers October 6, 2007 Slide 11 Environment as a strategic issue on board agenda? Case Fortum – a strategic approach “ …“

12. PricewaterhouseCoopers October 6, 2007 Slide 12 Environment as a strategic issue on board agenda? The role of the Board is to ensure that…. Market Competitors Geographic location Sosio-political environment Stakeholders Internal Employees Suppliers Customers External Shareholders Regulators Customers Corporate Strategy and Objectives Rule Base The role of the Board is to decide on… all (environmental) facts and weak signals together with risks have been identified and that they have been interpreted in wide enough contex. all relevant stakeholders have been identified, prioritized and weak signals listened to. the corporate strategy and objectives, the desired risk appetite, and depending on these, the relevant content of the Rule Base.

13. PricewaterhouseCoopers October 6, 2007 Slide 13 Environment as a strategic issue on board agenda? The Rule Base has to be proactive and the compliance processes need to be well integrated Reactive Rule Base not integrated compliance processes “Grasshoppers” Reactive Rule Base not integrated compliance processes “Grasshoppers” “Ants” Extended, proactive Rule Base and integrated compliance processes “Agility champions” Extended, proactive Rule Base and integrated compliance processes “Agility champions” Extended, proactive Rule Base, separate compliance processes “Peacocks” Extended, proactive Rule Base, separate compliance processes “Peacocks” Degree of integration Rule Base Extend Reactive Rule Base, integrated compliance processes Differentiation 1 Corporate Responbility aspects as part of the strategy

14. © 2007 PricewaterhouseCoopers. All rights reserved. “PricewaterhouseCoopers” refers to the network of member firms of PricewaterhouseCoopers International Limited, each of which is a separate and independent legal entity. *connectedthinking is a trademark of PricewaterhouseCoopers LLP (US).  *Connected Thinking sirpa.juutinen@fi.pwc.com * Thank You!